Is Qatar openly defying Saudi Arabia? It may look that way from Riyadh’s point of view …
Qatar Petroleum is raising its LNG production capacity by almost 30 million tons annually, the company said amid the rift between the tiny emirate and four of its neighbors, led by Saudi Arabia.
Qatar is currently the top LNG exporter globally and is facing growing competition from Australia as well as from hopefuls such as the U.S. and Russia, whose LNG export industry is young but ambitious. This increase in Qatar’s capacity, to come from more drilling in the North Field, will help it cement its position, achieved not least because of its low production costs.
The LNG market is currently saturated and prices are depressed. Yet demand for what many call a bridge fuel between oil and renewables is set for a steady increase over the long term, so a capacity increase certainly makes sense for a low-cost producer such as Qatar, which, after the expansion, will be able to produce 100 million tons of LNG annually. That about 40 percent of last year’s global supply, up from its current level of 77 million tons.
Politically, the move could be interpreted as open defiance to Saudi Arabia, the UAE, Egypt, and Bahrain, which tried to force Qatar to sever its ties with Iran and distance itself from Turkey, alleging the emirate funds terrorist groups.
Qatar has done nothing of the sort, with its Foreign Minister noting that the 13 demands the Saudi-led group presented it with as a condition to end the economic blockade they imposed on Qatar a month ago were deliberately formulated in a way that would make giving in to them impossible.
Now the initiators of the blockade have pushed themselves in a tight spot with few ways of exiting the situation with dignity. Qatar is importing food from Iran and Turkey. Earlier this week, the chief executives of Shell, Exxon, and Total visited the emir to discuss the expansion of gas production that the state energy company announced a day later.
Deals, Mergers & Acquisitions
• Sabine Oil & Gas has sold 7,886 net acres in the Haynesville shale for $45 million to GEP Haynesville LLC. The assets are located in Red River Parish, in Louisiana. Sabine Oil & Gas exited Chapter 11 bankruptcy protection last year.
• Sanchez Midstream Partners has struck a deal to sell production assets in Texas for $6.3 million in cash to Sendero Petroleum. The assets, including wells, leases and interests in several projects, are non-core for the company, which said it will use the proceeds to expand its midstream business in the Eagle Ford.
Tenders, Auctions & Contracts
• France’s Total and Chinese CNPC have inked a $4.8-billion deal with the Iranian National Oil Company for the development of the 11th phase of the South Pars offshore gas field – The Iranian part of what Qatar calls the North Field, the biggest in the world. This is the first large-scale Western investment in Iran’s recovering energy industry after the lifting of sanctions. Total will be operator of the project with 50.1%. The investment will be distributed over a period of 20 years.
• Russia and Pakistan have inked an agreement for the construction of a $2-billion gas pipeline that will carry LNG between Nawabshah and Lahore. The gas will come from Russia and the issue that remains to be agreed is the price. Russia is asking for $0.85 per MMBtu but Pakistan wants to reduce this to $0.78 per MMBtu.
• Saipem has won an engineering, procurement, construction, and installation contract from Aramco as part of a long-term agreement renewed in 2015 until 2021. The work will consist in the construction and installation of 19 jackets for offshore platforms to be deployed at five Saudi fields: Marjan, Zuluf, Berri, Hasbah, and Safaniya.
• Gazprom will start exporting gas to China via a Siberian pipeline in two years. The pipeline, Power of Siberia, will have an annual capacity of 38 billion cu m. The project is a partnership between Russia’s top gas producer and CNPC. The Chinese state firm said it will speed up the construction of the pipeline along with gas processing plants and storage facilities. Gazprom, for its part, will need to start developing two new gas fields in order to be able to fill the pipeline.
Discovery & Development
• Argentina’s state energy company YPF will invest $1.2 billion in exploration activities in the province of Chubut, in southern Argentina. Chubut is the country’s most productive oil region and YPF will focus on secondary and tertiary recovery there, along with new production. Chubut currently produces 27% of Argentina’s half a million barrels of crude daily.
• Brazil plans to tap its reserves of shale and tight oil and gas next year, despite strong public opposition to fracking. The country may hold as much as 5.4 billion barrels of unconventional oil and 250 trillion cu ft of natural gas, however, so a discussion of whether it’s worth trying to tap these reserves is in order, according to an official from the Mines and Energy Ministry. A pilot project is being discussed but the discussion is in the early stages – it has not yet been decided who will pay for it, where it will be located, and who will conduct it.
• Statoil has discovered oil in the Kayak formation in the Barents Sea, the company said. The reserves of Kayak are estimated at a recoverable 25-50 million barrels of oil equivalent but, according to a senior company official, there may turn out to be more oil and gas in the formation, which is not the usual type of rock Statoil has explored in the area.
• Vietnam has begun drilling for oil and gas in a contested are of the South China Sea. The Block 136-03, as it is called in Vietnam, or Wan-an Bei, as China calls it, is about 250 miles from the Vietnamese shore, and the Chinese government has awarded a license to another company to explore for oil and gas there.
• An appeals court has prevented the Environmental Protection Agency from delaying a rule that would have tightened methane emission reduction requirements for the energy industry. The EPA, under its new management from the Trump administration, stayed the new rule for 90 days, with Scott Pruitt saying he was considering extending the stay to two years. Several environmental groups immediately filed a lawsuit against the EPA and the Court of Appeals for the DC Circuit found in favor of the plaintiffs, saying the decision for the stay was “arbitrary and capricious-that is, unlawful.”
• South Africa’s Petroleum Agency may soon award fracking licenses to oil and gas explorers. Despite a moratorium on new shale oil and gas licenses, South Africa’s shale gas reserves could turn out to be large enough to warrant reconsideration. Potential shale gas reserves in the country have been revised to 201 trillion cu ft, although international prices are still too low to motivate a removal of the moratorium.
Politics, Geopolitics & Conflict
• A group of pro-government demonstrators in Caracas stormed the parliament and beat up opposition MPs earlier this week. At least five MPs were injured, according to the Speaker, who took to Twitter to report on the attack.
• North Korea fired a new intercontinental ballistic missile, prompting South Korea to fire warning shots in response. The crisis on the Korean Peninsula is deepening and the U.S. Ambassador to the U.S. Nikki Haley said military escalation is not out of the question.
• Meanwhile, the U.S. carried a second air strike against Al-Shabaab militants in Somalia in as many days. U.S. involvement in the war-torn country is in support of the government in its effort to handle the Al Qaeda-affiliated group.
• The fifth round of peace negotiations for Syria has ended in Astana, Kazakhstan, without any evident progress, such as the setting up of the four de-escalation zones in four parts of the country.